Ann: Chairman's Address to Shareholders, page-40

Hi John

I guess I simply see a step change in production from the investments made over the last 12-24 months. Medusa's problem for a long time has been getting enough ore to the mill. The new service shaft would appear to solve this issue. That should see a 20-25% increase in tonnage. My understanding is that the grades also dramatically improve toward the reserve grade of 7.2 g/t when for much of the last two years it has been nearer 5 g/t.

You can see already in the last few quarters a nice improvement in grade. Aside from the shaft expenditure of US$10M there has also been quite a lot other improvements which have kept the AISC elevated including a new TSF (detailed on PDF page 13 of the presentation).

Underground mining is always difficult to understand for me so there is always an element of faith. Last year the company got a specialist mining consultant to go through the whole process and I think all their investment and planning has come from this review. There was a video of him from the AGM last year that I remember watching and being impressed.

Back earlier in the thread CPDLC went through his cost estimates and it's hard to fault his knowledge of this company. I like to be a little bit more pessimistic when forecasting and even on a pretty pessimistic forecast of 140,000 oz at $900 this company looks very undervalued. They are short reserves but they have managed to replenish them each year for 6 years so that doesn't worry me.

The safety performance is a worry given that they've had three deaths in the last 18 months from memory. I'm sure the company is doing everything they can in this regard but the lack of safety culture in the Philippines is no doubt an issue. I'm not sure if this introduces a risk of mine shutdown from a regulator if it keeps happening.

Keep in mind the December quarterly has been flagged as being a bit average due to some lost production but this hasn't impacted the full year guidance. That's probably already built into the share price I think.